Three reasons gold is NOT boring
Wednesday, 28 February 2018
By Bernd Struben
- Mark these three dates on your calendar
- Decidedly ‘not boring’…
- Speaking of important dates
Is gold boring?
That’s the question being floated by leading gold miners at the BMO metals and mining conference in Florida.
Executives at Franco-Nevada Corp. and Barrick Gold Corp. say they are having trouble attracting retail investor interest. And they’re blaming this on the hype surrounding cryptocurrencies, marijuana stocks, and electric vehicles (EVs).
(Ahem. Yes, we may have mentioned those from time to time.)
The proliferation of EVs, as you likely know, has seen an explosion of interest in lithium and cobalt stocks. Both metals are vital elements of today’s leading battery tech.
As Bloomberg reports:
‘Large producers such as Barrick Gold Corp. and Goldcorp Inc. surged in 2016 as they emerged from a multi-year downturn. Since then, they’ve largely decoupled from bullion, which has continued to rise, and are trading at the cheapest versus the Dow Jones Industrial Average in more than a year…
‘“Right now, gold has been so boring and asleep th
at nobody cares,” [said] David Harquail, chief executive officer of precious-metal royalty and streaming company Franco-Nevada Corp.’
The graph below shows you the performance of gold (white line), gold ETFs (purple line), and the major gold producers (blue line).
Click to enlarge
As you can see, gold is up 5.76% since this time last year. Gold ETFs more than doubled that gain, up 12.99%. While the major producers are down an average of 6.03%.
To me that spells opportunity. Especially as the major gold producers are trading at their cheapest value compared to the Dow in more than a year.
More after the markets, where volatility is alive and well.
If you had any lingering doubts about the power of the US Federal Reserve to move global markets, set them aside.
New Federal Reserve Chair Jerome Powell caught complacent investors around the world unaware yesterday.
Powell spoke before the US House Financial Services Committee. It was his first testimony since taking over the top spot from Janet Yellen last month.
And his tone was decidedly hawkish.
The US economy is already ticking along at speed. Unemployment is at 4.1%, a level considered to be full employment. And Donald Trump’s US$1.5 trillion corporate tax cut is expected to further fuel economic growth over the next two years.
With a nod to these tailwinds for the US economy, Powell said he wanted to avoid an ‘overheated economy’. This leaves the door open for four possible rate rises from the Fed this year.
And major stock markets promptly lost ground across the world.
Overnight, the Dow Jones Industrial Average closed down 299.24 points, or 1.16%.
The S&P 500 lost 35.32 points, or 1.27%.
In Europe, the Euro Stoxx 50 index finished down 5.15 points, or 0.15%. Meanwhile, the FTSE 100 fell 0.10%, and Germany’s DAX fell 36.31 points, or 0.29%.
In Asian markets, Japan’s Nikkei 225 is down 213.20 points, or 0.95%. China’s CSI 300 is down 1.20%.
In Australia, the S&P/ASX 200 is down 42.76 points, or 0.71%.
On the commodities markets, West Texas Intermediate crude oil is US$62.85 per barrel. Brent crude is US$66.63 per barrel.
Gold is trading for US$1,316.61 (AU$1,690.13) per troy ounce. Silver is US$16.41 (AU$21.07) per troy ounce.
One bitcoin is worth US$10,573.58.
The Aussie dollar is worth 77.90 US cents.
Mark these three dates on your calendar
Egizio Bianchini is the outgoing co-head of global mining for BMO Capital Markets. He’s seen interest in gold come and go during his time. And he has no doubt retail investors will return to the big gold miners.
‘While investors center their attention on giant tech stocks, along with companies riding the bitcoin, marijuana and electrification booms, “gold will have its day,” Bianchini said.’
I have no doubt Bianchini is right. Except I’d add that gold is already having its day today.
Not as an investment, mind you.
The yellow metal’s most important role is as a store of wealth.
Gold has been used as a currency for thousands of years. It’s accepted around the world. It will be one of the few things to survive if your house burns down. And when inflation ramps up in developed economies —which it will — you can bet gold will be back in vogue.
There are a lot of good anecdotes about gold’s ability to protect your purchasing power. My favourite one dates back to the Roman Empire.
Turning back the clock some 2,000 years, a Roman could purchase a new toga, a leather belt, and sandals for one ounce of gold. Today, that same ounce of gold will still buy a man a suit, a leather belt, and a pair of shoes.
Compare that to the mighty US dollar…the world’s reserve currency.
And instead of 2,000 years, let’s just go back 100 years. Any guesses what today’s dollar was worth in 1918?
According to Saving.org, 5.5 cents.
Meaning you’d need about 18 times as many dollars to buy the same set of clothes today as you would have 100 years ago.
Now granted, maintaining value may not be as exciting as taking a punt on bitcoin. One that could see your investment double — or get cut in half — in a matter of days.
But if it’s big gains — along with a healthy dose of risk — that you’re after, you shouldn’t be looking at bullion. Or the major gold producers, for that matter.
According to senior resources analyst, Jason Stevenson, the most exciting opportunities in 2018 all operate in a very specific niche — the junior gold space. And he’s culled the field down to three stocks he expects to hit triple digit returns by August this year.
7, 17, and 29 of August, to be precise. He’s marked these dates on his calendar. I suggest you do the same.
Decidedly ‘not boring’…
How can Jason be so specific with the expected dates of triple digit returns for his top three gold stock picks?
It all has to do with gold’s ‘EP-6 signal’.
You won’t have heard about this from mainstream analysts. But Jason has been following his proprietary EP-6 signal for the past 14 months. And time and again, when the signal has gone off, the junior gold stocks in question have seen their share prices soar by 500% or more…within six months.
I know this sounds remarkable. And it is. But the results of lengthy back-testing back him up.
Here’s what Jason writes about junior gold stock, Artemis Resources Ltd [ASX:ARV]:
‘Take gold miner Artemis Resources for example. Had you known about gold’s magic EP-6 signal you might have caught it flash on 23 May 2017.
‘At the time each share sold for around 7 cents.
‘Sure enough, almost six months later on 13 November 2017, you could have cashed out with a 653% gain as Artemis shares surged to 55 cents.
‘Do the sums on that one…
$500 on Artemis Resources in late May would have mushroomed to $3,265 just six months later.’
Now there are four things to note here.
One, a 653% gain in six months would have even crypto investors drooling.
Two, shares in Artemis fell sharply after peaking on 13 November. To walk away with a 653% gain you would have had to time the top. However, even a fairly loose trailing stop loss — one that follows your gains on the way up — could have seen you exit with close to 600% gains.
This is not a buy-and-hold strategy. At time of writing Artemis shares are trading for 20 cents. That’s still well up from the 7 cents when the EP-6 signal flashed. But you’ll want to consider an appropriate exit strategy.
The third thing to note is that back testing, as our editors often remind you, is no guarantee of future performance. However, as Jason demonstrates in detail here, Artemis is only one of many junior gold stocks the EP-6 signal correctly flagged as a stock set to skyrocket.
Finally, you may have noticed that Jason chose $500 as an example of the investment amount in Artemis.
Depending on your financial situation you may choose to invest more. But no matter how effective the EP-6 signal turns out to be now that’s it’s gone live, junior gold miners remain highly risky investments. Never invest more than you can afford to lose.
With those cautions out of the way, if you’re looking for some decidedly non-boring investments in the gold sector, look no further. Just go here.
Speaking of important dates
You may want to mark tomorrow down in your calendar too.
Tomorrow publisher Kris Sayce opens the doors to new membership in our most popular trading service. But the doors will close again in one week, on 8 March.
Watch this space for more tomorrow. And keep an eye on your inbox.
Finally, this, from The Australian Tribune:
‘Northern Territory Slips Up in Battle Against Alcohol Abuse’
‘The Northern Territory has the highest per-capita rate of alcohol consumption in Australia.
‘And all of those drinkers are going to be digging deeper to fund their habit, with the NT government setting a minimum price for alcohol.
‘Undoubtedly this will see some residents drinking less. Others will cut spending, including on food and medical needs for their families, to keep the liquor cabinet filled.
‘Some may even turn to crime as…’
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